Download URUGUAY

URUGUAY
Economic Freedom Score
25
World Rank:
43
Regional Rank:
5
Least
free 0
ruguay’s economic freedom score is 68.6, making its
U
economy the 43rd freest in the 2015 Index. Its score
has decreased by 0.7 point since last year, with declines in
50
75
Most
100 free
68.6
Freedom Trend
71
six of the 10 economic freedoms, including labor freedom
and the management of government spending, outweighing an improvement in freedom from corruption. Uruguay
is ranked 5th out of 29 countries in the South and Central
America/Caribbean region, and its overall score is above the
world average.
Over the past five years, economic freedom in Uruguay has
declined by 1.4 points, with losses in half of the 10 economic
freedoms. A double-digit improvement in business freedom
has been more than offset by declines in labor freedom and
the control of government spending.
Uruguay has a history of economic openness and relies on
international markets for its agricultural exports. A liberal
labor market, strong rule of law, and prudent government size
distinguish Uruguay from neighboring Brazil and Peru. Economic reforms have largely turned around an economy that
sought IMF help for its fiscal problems in the early 2000s.
More sustained efforts are needed to rein in growing government spending and fix an increasingly rigid labor market.
BACKGROUND: Former leftist guerrilla Jose Mujica was
elected president in 2009. After strong growth in 2010 and
2011, the economy has slowed. Trade has been hurt by commercial restrictions in Argentina. State involvement in the
economy is substantial, and deregulation is needed in telecommunications, energy, and public utilities. Crime and
violence are increasing, and drug trafficking is a problem in
urban areas. Uruguay is a founding member of MERCOSUR
and signed a Trade and Investment Framework Agreement
with the United States in 2007. The economy is still based
largely on exports of commodities like milk, beef, rice, and
wool. Despite excellent banking services, including branches
of some of the world’s largest banks, an information-sharing
agreement with Argentina has reduced consumer confidence
in Uruguay as a safe haven for assets.
How Do We Measure Economic Freedom?
See page 475 for an explanation of the methodology
or visit the Index Web site at heritage.org/index.
70
69
68
67
2011
2012
2013
2014
2015
Country Comparisons
68.6
Country
World
Average
60.4
Regional
Average
59.7
Free
Economies
84.6
0
20
40
60
80
100
Quick Facts
Population: 3.4 million
GDP (PPP): $56.7 billion
4.2% growth in 2013
5-year compound annual growth 5.1%
$16,723 per capita
Unemployment: 6.3%
Inflation (CPI): 8.6%
FDI Inflow: $2.8 billion
Public Debt: 59.4% of GDP
2013 data unless otherwise noted.
Data compiled as of September 2014.
451
URUGUAY (continued)
THE TEN ECONOMIC FREEDOMS
Score
RULE OF
LAW
Country
World Average
Property Rights 70.0
Freedom from Corruption 73.0
0
20
40
60
80
Rank
1–Year
Change
30th
19th
0
+2.4
100
Corruption is low by regional standards, and by 2013, government institutions had established
a fairly strong record of accountability to the electorate. The Transparency Law criminalizes a
broad range of potential abuses of power by officeholders. The judiciary is relatively independent, but the court system remains severely backlogged. Private property is generally secure,
expropriation is unlikely, and contracts are enforced.
Fiscal Freedom 77.1
GOVERNMENT
Government Spending 65.1
SIZE
109th
99th
0
20
40
60
80
–0.3
–2.9
100
The top individual income tax rate is 30 percent, and the top corporate tax rate is 25 percent.
Other taxes include a value-added tax and a capital gains tax. The overall tax burden amounts to
27.6 percent of gross domestic product. Government spending equals 34.1 percent of domestic
output, and public debt equals approximately 60 percent of the domestic economy.
REGULATORY
EFFICIENCY
Business Freedom 72.6
Labor Freedom 64.3
Monetary Freedom 71.6
52nd
75th
136th
0
20
40
60
80
–1.9
–3.8
–0.5
100
With no minimum capital required, incorporating a business takes five procedures and less
than a week, but licensing requirements are still time-consuming. Although the non-salary cost
of hiring a worker is moderate, the labor market remains relatively rigid. The state resorted to
unsustainable measures (e.g., a supermarket price freeze agreement) in early 2014 to prevent
inflation from rising above 10 percent.
OPEN
MARKETS
Trade Freedom 81.8
Investment Freedom 80.0
Financial Freedom 30.0
61st
23rd
131st
0
20
40
60
80
–0.7
0
0
100
The average tariff rate is 4.1 percent. Uruguay, a member of the MERCOSUR Common Market,
requires import licenses for some goods. Foreign and domestic investors are generally treated
equally under the law. The financial system has become more stable, but significant state presence continues in many parts of the system including the banking sector. Government-owned
commercial banks pose systemic vulnerabilities.
Long-Term Score Change (since 1995)
RULE OF LAW
Property Rights
Freedom from
Corruption
452
+20.0
+23.0
GOVERNMENT
SIZE
Fiscal Freedom
Government
Spending
–7.5
–14.5
REGULATORY
EFFICIENCY
OPEN MARKETS
Business Freedom
+2.6
Labor Freedom
–11.6
Monetary Freedom +26.4
Trade Freedom
+18.8
Investment Freedom +10.0
Financial Freedom
–20.0
2015 Index of Economic Freedom